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January 9, 2009
Mixing science and business
Oil industry insider speaks at the Albert Einstein Business Forum.
ADRIANNE FITCH
Canada could become the next energy superpower by exploiting its vast oil sand deposits, an oil industry insider said recently. However, an appalling lack of leadership, efficiency and engineering expertise have inflated mining costs and held the industry back, said Sam Spanglet, a former vice-president of Oil Sands Shell and former president of Albian Sands.
Spanglet, born in Germany and educated in Israel, spoke to about 30 Vancouver business executives Dec. 11 at the Terminal City Club. The luncheon was part of a new series of Albert Einstein Business Forums, hosted by Canadian Friends of the Hebrew University of Jerusalem (CFHU).
CFHU, a fundraising arm of Hebrew University (HU), created the business forums to promote the university and highlight its contributions to science and business. Co-chaired by HU alumni Gary Segal and Randy Milner, the forums will feature more guest lectures in the coming year, on topics of interest to the business community.
Spanglet, who earned his chemical engineering degree from Technion, Israeli Institute of Technology, in 1973, commented on the recent plunge in oil prices, from $147 to $40 a barrel within three months. Based on a perceived destruction of demand, the drop was a sign of short-sightedness and economic panic, said the retired oil executive.
"It was an overreaction – the world hasn't changed that much," said Spanglet. "Destruction of supply is what's really going on. Oil is a finite product and every day the world produces less than the day before.
"I believe we are setting ourselves up for a huge supply destruction," said Spanglet.
Economic panic has stopped development in oil exploration, further endangering supply, Spanglet noted. Declining gas prices encourage waste, as drivers hop back into their sports utility vehicles and Cadillacs. This behavior also harms the environment.
"It's easy to blame big industry for the environment," said Spanglet. "But, as individuals, we are less responsible to the environment than oil companies. We are very selfish. We don't think three months in advance, we only think about yesterday and today."
Spanglet added that, while oil reserves in North America are well known, all we know about Saudi Arabia and the Gulf states is what they tell us. "If you want to believe them, be my guest," said Spanglet. "I believe their oil reserves are far less than what they claim."
Given the probability of an impending energy crisis, Canada is poised to become a huge player in the oil business, said Spanglet. Northern Alberta's oil sands contain more than 350 billion barrels of crude oil, second only to Saudi Arabia's reserves, he said.
The advantage to oil sand mining is that deposits are visible at ground level, eliminating the financial risk of exploration, Spanglet explained. The disadvantages are the huge financial and environmental costs of drilling, pumping and treating the thick, viscous oil (also known as bitumen), separating it from sand and converting it into usable fuel, he said.
Mining, processing and construction costs are out of control, said Spanglet, because of bad management and a lack of leadership, efficiency and engineering competency. As an oil executive, Spanglet once approached a group of mine construction workers to ask if it bothered them, at wages of $70 an hour, to be standing around doing nothing. The workers filled Spanglet in on myriad bad decisions on the part of management and engineering staff, including the engineering error causing their delay. "They said to me, 'Why the hell should we care, if you [executives] don't care?' "
Spanglet said Canada's oil industry has been lax in rewarding excellence and punishing poor performance. "We just cannot deal with confrontation," said Spanglet. "Most of the workers hate to perform badly, they want to be successful, but leadership is not doing their part.
"The problem is that we are not prepared to manage accountability," he added.
Also troubling are the environmental costs of extracting and treating the oil sands, he said. The messy, cumbersome process requires huge expenditures of energy, not to mention cleanup and waste disposal.
No stranger to controversy, Spanglet made headlines last year by publicly criticizing Alberta's oil companies for not controlling costs. Part of a government panel, he recommended charging oil and gas companies an extra 20 per cent in royalties to increase provincial revenues by $2 billion a year.
Dina Wachtel, executive director of CFHU Western Region, hopes that the business forums will publicize Hebrew University's contributions to science and business.
"This is a new outreach," said Wachtel. "We hope to attract the business sector and expose them to Hebrew University, where, indeed, science meets business."
Wachtel elaborated on the scientific achievements and revenues generated by Hebrew University, which, she said, ranks fourth in the Asia-Pacific region and 65th world-wide. Because of these achievements, Israel is ranked 12th worldwide in academic scientific research, Wachtel said.
Adrianne Fitch is a Vancouver freelance writer.
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